The government has decided not to raise the price of fuel until the end of September as it anticipates lower global oil prices. (ID Photo/Emral Firdiansyah)

Gov't to Keep Fuel Price Steady Through September

BY :DION BISARA

JUNE 23, 2017

Jakarta. The government has decided not to raise the price of fuel until the end of September as it anticipates lower global oil prices.

The fuel price has been held steady since the beginning of the year, as the government seeks to keep inflation in check and encourage greater consumer spending in attempt to accelerate economic growth.

"The government has decided not to raise fuel prices, especially that of RON 88 gasoline and diesel, or biodiesel, from July 1, 2017 to Sept. 30, 2017," Energy and Mineral Resources Minister Ignasius Jonan said on Thursday (22/06), as quoted by state-run news agency Antara.

The government phased out fuel subsidies in 2014 to allocate a larger portion of the state budget to infrastructure development. However, it still regulates fuel prices through state-owned energy company Pertamina, which controls fuel distribution in the country.

Economists say this policy merely shifted the subsidy burden to Pertamina, which must shoulder the costs when global oil prices rise, because most of the country's fuel is still imported. That in turn, undermines the state budget, because of a smaller contribution from Pertamina.

However, Jonan said President Joko "Jokowi" Widodo is willing to take the risk of keeping the policy in place for longer, hoping that a recent decline in global oil prices would continue.

"That is with consideration of various factors, including economic growth; there is also a trend of declining world crude oil prices," Jonan said.

The West Texas Intermediate crude oil price has fallen to around $42 per barrel this week – its lowest since August, after peaking at $53 per barrel just two month ago.

Jonan said the government will also keep the price of subsidized liquefied petroleum gas unchanged at Rp 13,500 ($1) until September.

Electricity tariffs will also stay put for even longer.

"Essentially, there will be no increase from July 1 to December 31, 2017. In fact, it is expected to fall," Jonan said.

Fuel and electricity prices make a substantial contribution to the country's rate of inflation. The government aims to keep inflation at 4 percent this year.

The inflation rate accelerated to 4.33 percent in May from 4.17 percent a month earlier due to rising demand ahead of Ramadan driving up food prices.

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